ICAC’s legal liabilities in corruption cases will hurt taxpayers

Most, but not all, of that legal bill will be recouped from the Independent Commission Against Corruption, which has been ordere­d to pay his costs.

Coincidentally, ICAC’s annual report shows the agency estimates it has $1.2m in potential legal liabilities. Those liabilities, along with ICAC’s own legal costs in its vain pursuit of Mr Kinghorn, will eventually be met by NSW taxpayers.

Even though this will still leave Mr Kinghorn out of pocket, the Sydney businessman believes his long struggle for vindication has been worth it.

He can now point to two court rulings that say in unmistakeable terms that ICAC was wrong when it ruled that he was corrupt.

The latest judgment, by the NSW Court of Appeal, was handed down last Friday and prevents ICAC doing anything to challenge its defeat last year at the hands of Mr Kinghorn.

In July last year, the Supreme Court found that ICAC was wrong when it ruled against him. The commission’s finding that he was corrupt “was not made according to law and is a nullity”, it ruled.

These decisions mean Mr Kinghorn joins prosecutor Margaret Cunneen SC and fellow businessman Andrew Poole as the foundation members of an elite club: the innocent victims of ICAC who have been exonerated by the legal system.

As Mr Kinghorn’s $1.3m legal bill shows, fighting back against ICAC’s errors is beyond the means of ordinary people.

All three members of the “innocent victims” club have had either the financial means or the legal skill to prove that this agency made serious mistakes about its own jurisdiction or the requirements of the law.

Mr Kinghorn has some firm views about what went wrong when ICAC examined his role in a proposed deal between two compani­es with which he was associat­ed, Cascade Coal and White Energy.

His chief criticism is that this supposedly independent commission is nothing of the sort.

In his view, it has become too close to the executive branch of government.

“There is no doubt in my mind,” he said. “They should have sat back and actually analysed what went on and considered whether there was corruption.

“They didn’t; they got very involve­d with the government — not just the government, the Liberal­ Party.

“They are not independent — and they should be. The only way they can function is if they are totally­ independent, and they are not.”

Mr Kinghorn’s concerns are the latest in a series of allegations that the agency became too close to the state government when it was led by then premier Barry O’Farrell.

Court challenges alleging that relationship meant that ICAC was biased have failed. But documents produced for those challenges have left little doubt that when Mr O’Farrell was premier, and David Ipp was ICAC commissioner, the government was much closer to ICAC than it is to the courts.

Those documents provide an insight into what was going on behind­ the scenes when ICAC was conducting an inquiry into the allocatio­n of coal exploration licenc­es by the previous Labor government.

One of those licences was eventually acquired by Cascade Coal.

The first surprise is that Mr Ipp and some of ICAC’s senior officials made suggestions to the government about how it could make changes that would adversely affec­t parties to the inquiry.

ICAC also commissioned legal advice on how the government could avoid legal challenges if it made decisions without waiting for the inquiry’s findings.

These incidents are outlined in documents covering the period from late 2012, when ICAC launched the public inquiry that it refers to as Operation Jasper.

This is the inquiry that culmin­ated in January last year when Mr O’Farrell accepted ICAC’s recom­mendation and enacted special legislation cancelling coal explor­ation licences that were then in the hands of Cascade Coal and NuCoal Resources.

However, he rejected ICAC’s call for innocent parties to be compensated — a decision that has triggered disputes with investors whose holdings were rendered worthless. As well as Australians, the expropriations affected innocent shareholders in Japan, Germany and the US.

US investors, who lost about $120m, have accused Australia of breaching a treaty that bans the expropriation of American assets unless it is done with “due process of law” and is followed by prompt, adequate compensation.

A similar treaty is in force with Japan, where just one company, Nippon Gas, lost $40m it had invested in Cascade Coal.

The material that has now come to light, and the fact that ICAC is a branch of the executive rather than the independent judiciar­y, raises questions about whether Australia will be able to argue that the expropriations were the result of a process that US and Japanese authorities would recognise as “due process of law”.

One year before the expropriations, a briefing note prepared for Mr O’Farrell revealed that Mr Ipp had discussions with a senior official of the state government midway through the inquiry into the allocation of the licences.

That briefing note, dated January 15, 2013, was prepared by Paul Miller, general counsel of the Departm­ent of Premier and Cabin­et, and refers to a meeting between Mr Ipp and Chris Eccles, the director-general of the department.

The briefing note shows that, before the inquiry was complete, those discussions concerned the proposed recommendations.

Mr Ipp wanted the government to send him a letter “as a ‘diplomatic’ matter, given that recommend­ations of the type proposed are somewhat unusual, in so far as they would constitute an opinion as to appropriate executive government action, rather than merely factual findings as to the presence (or absence of) corrupt conduct”, the briefing note says.

Mr Ipp had also been in discussions with planning minister Brad Hazzard and suggested that a development application for a mine at Mount Penny should not be issued­ until he had completed his report, according a file note made by Mr Eccles on January 31, 2013.

On the same day, Mr Ipp wrote to Mr Eccles about “our telephone conversation of earlier today concerning the process of granting a mining licence to Mount Penny Coal Pty Ltd”.

He then summarised legal research undertaken by ICAC solic­itor Roy Waldon into the statutory requirements on the government whenever it grants a mining lease and said “there is an alternative approach”.

At the time, ICAC was part-way through its inquiry and, offic­ially, had not made any findings.

Mr Ipp’s letter says: “The evidence given by witnesses at a public inquiry is available before the commission publishes its report. Such evidence can be taken into account when considering the public interest question.”

He noted that evidence given to ICAC under objection could not be used against the witness in subsequent criminal or civil ­proceedings but “consideration by the minister of the public ­interest does not involve such proceedings”.

ICAC’s Mr Waldon wrote separately to Mr Eccles, relaying the thrust of his discussions on this subject with Sam Haddad, director-general of the Department of Planning and Infra­structure.

Five days later, on February 5, 2013, Mr Waldon commissioned legal advice from one of the nation­’s leading silks, Bret Walker SC, “on two matters connect­ed with the issue of whether the government or the relevant minister can take action to refuse to grant a mining lease for the Mount Penny tenement”.

On February 20, Mr Ipp passed on Mr Walker’s advice to Mr O’Farrell.

The NSW Court of Appeal has ruled authoritatively that this material does not mean ICAC was biased. There is no suggestion that Mr O’Farrell engaged in wrongdoing or that Mr Ipp’s actions were not authorised by the ICAC Act.

The point, however, is that the entire process that led to the expro­priation is now the subject of international scrutiny on behalf of aggrieved shareholders.

American institutional investors have briefed the world’s most successful litigation law firm: Quinn Emanuel Urquhart & Sul­livan. Government officials in Washington and Tokyo are aware of the affair.

If the expropriation of the coal exploration licences leads to commercial arbitration between Australia and two big trading partners, the issue will not be bias but whether this procedure can be defende­d as being “due process of law”.

If it is found wanting, the taxpayers of NSW might eventually come to see the pending payout to Mr Kinghorn as simply the first.

Once Australian shareholders are included, the cost to taxpayers of accepting ICAC’s call for expropriation of those licences could be far more than the $160m sought by the Japanese and Americans.

(WTF) used with permission.